QuantumPharm soars in Hong Kong trading debut as traders bet on AI-backed drug researcher

QuantumPharm's shares soared on their trading debut in Hong Kong, as traders piled into the stock even before the AI-powered pharmaceuticals researcher posted any profit.

Trading under the stock code 2228, QuantumPharm's shares opened at HK$5.39 and soared by as much as 24.6 per cent before settling at HK$5.93 during the lunch pause, compared with their initial public offer (IPO) price of HK$5.28. The Shenzhen-based company priced its stock at the lower end of a price range this week.

The company raised HK$989.3 million (US$126.7 million) in its IPO, making it the third-largest stock sale this year in Hong Kong. Public investors oversubscribed the offer by 103 times, triggering a clawback mechanism under the listing rule that increased the shares available for retail investors to 37.48 million, or 20 per cent of the total offering, while reducing the international tranche to 80 per cent.

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Founded in 2015 by three quantum physicists trained at the Massachusetts Institute of Technology, QuantumPharm says it combines quantum physics, artificial intelligence (AI), cloud computing and robotics to provide R&D services and products for the pharmaceuticals, biotechnology, renewable energy and advanced materials industries.

"The atmosphere among retail investors has improved significantly, so the current market condition [is conducive to] raising a larger amount," said KGI Asia's head of investment strategy Kenny Wen. "If another two or three companies worth HK$20 billion to HK$30 billion succeed in their IPOs and their stocks perform well, that will definitely help the overall market."

@XtalPi is the first company listed in #HongKong under new listing rules for pre-revenue specialist technology companies #Chapter18C @HKEXGroup pic.twitter.com/oWXE6tTNNL

- Aileen Chuang (@aileenchuang) June 13, 2024

QuantumPharm will use most of its IPO proceeds to enhance research and development capabilities and provide solutions.

QuantumPharm remains unprofitable, as its 2023 loss widened 19 per cent to 522 million yuan (US$72 million), from 437 million yuan a year earlier. Still the company's successful fundraising values it at HK$20.2 billion.

QuantumPharm is the first company to list in Hong Kong under Chapter 18C, a new regime introduced more than a year ago for pre-revenue specialist technology firms. Chapter 18C allows companies worth at least HK$10 billion to sell shares even before they have made any revenue.

Normal listing candidates have to make at least a combined HK$80 million profit in the three years leading to their IPO.

Executives of QuantumPharm at a press conference on June 3, 2024 in Hong Kong. From left: Co-founder and Executive Director and Chief Executive Officer Ma Jian; Co-founder and Executive Director and Chairman of the Board Wen Shuhao; and CFO Tam Man Hong. Photo: Xiaomei Chen. alt=Executives of QuantumPharm at a press conference on June 3, 2024 in Hong Kong. From left: Co-founder and Executive Director and Chief Executive Officer Ma Jian; Co-founder and Executive Director and Chairman of the Board Wen Shuhao; and CFO Tam Man Hong. Photo: Xiaomei Chen.>

"It is a significant moment, because China is becoming a world innovation powerhouse, and Hong Kong provides the world with unique access to the companies driving that trend," said the stock exchange's chief executive Bonnie Chan Yi-ting, who wrote the 18C rules while she was the chief operating officer of the exchange.

Another Chapter 18C candidate, Black Sesame International Holding, which makes chips for autonomous driving, passed its listing hearing on Hong Kong stock exchange on Wednesday. International Financing Review reported that it is seeking an IPO of about US$200 million.

The successful fundraising is a sign of a nascent recovery of Hong Kong's IPO market. QuantumPharm's IPO would take the overall fundraising in Hong Kong this year to US$1.41 billion, a third lower compared with a year ago. New listings raised US$24.49 billion in the same period in 2021.

Tencent owns 12.91 per cent of QuantumPharm after the IPO. The pharmaceutical's list of shareholders include HongShan, Google and SoftBank Group.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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